I’ve been a real estate broker for 16 years now and in the business for almost 19. I’ve owned franchises, helped lead a local mom and pop after the crash and started my own company in 2014. I’ve had earning years and learning years.
I’m invested in my business and my agents, professionally, financially and emotionally. My staff and I work tirelessly to make sure they have the best tools, opportunities and support possible. Nothing gives me greater satisfaction than watching our agents’ incomes grow year after year.
A Challenge We As Broker-Owners Share
Recently, an agent who started with us a couple of years back left for what she perceived as greener pastures. Her decision had nothing specifically to do with us; a new management team at a legacy franchise wined and dined her over a period of weeks. As I processed this, I remembered making a similar decision in my twenties.
Out of college I went to work in retail management. I had a great thing going at my first job, but thought I was moving too slowly. (I had an exaggerated opinion of myself even then.) I jumped ship for a better offer and soon realized I’d made a mistake. It took five years to swallow my pride and go back to where I began. I ended my retail career at the company I started at. I left because I wanted to be an entrepreneur, but that’s another story.
Challenges Lead To Mindset Shifts
With the help of some professional coaching, I worked through what went right, what went wrong and what I’d do differently in the future. I concluded that that agent leaving was beyond my control. I also faced the fact that it would happen again. Like you, I want every agent who joins my team to love us and stay forever.
The epiphany I had that resulted in a shift in my mindset was that there are parts of the business I can control, and there are parts of the business I cannot. I realized I have income streams that I personally own, and that allow me the income to lead the life I want to live. (You have these too.) I also realized in a blinding flash of the obvious that, like you, I also have an income stream that I do not own and do not control.
Every Brokerage Has At Least Two Streams of Income
There are two fundamental streams of income for brokerages large and small. The first stream is the income you as the broker-owner are personally responsible for — and can control — called personal production. The second stream of income is what your agents generate. Here you certainly have influence, but little control. This is called agent production.
Some larger brokerages may have a third income generated by affiliate relationships, or in-house wholly owned mortgage and title service businesses. These provide additional income to the brokerage. This is terrific income, but it is dependent on the overall health of the market and the agents being willing to recommend the services to their clients at the expense of their other business and personal relationships. This income will cycle up and down with up and down markets as well.
Property Management Services Income
I am a huge fan of the property management business when it is set up as a self-managing entity. The trick is to get to a base level of volume that will support a dedicated team devoted to your landlord-owner clients. As a broker-owner, you will often find that the relationships you build with owners will be some of the most profitable referral-based relationships you will ever have.
I also want you to own this business. I do not advocate bringing on property managers with their own books of business. You will have little or no control over their activities, but you will legally take on all of the risk and you will make very little money on a deal that is still subject to the whims of the agent. You may not get rich on property business, but you will find that it covers a huge amount of overhead, and the resulting sale and listing commissions from the landlord-owners is pure profit.
Take A Look At Your Numbers
Take some time with your accountant or bookkeeper and break your income and expense history down by your different streams of income. I use my profit and loss report to look backward and a spreadsheet I created called The Cash Flow Forecaster to project my income and expenses into the future.
It’s important that you understand what your brokerage profits are based on the business you control — personal production, property management, appraisals, etc. — versus the profit your brokerage generates from your agents and affiliated relationships.
You may find, like I did, that both parts of your business are profitable, but not necessarily sustainable. Or, you may realize you are overly dependent on your agents. Or, you may decide that investing in your personal production, lead generation and a sales team that works for you is a path forward to sustainable income you can control.
Final Thoughts
The agent business is a competitive business and will only become more so. Your personal business is a “free zone” with much less competition. Your personal stream of income is dependent on you and only you.
The profitable way forward lies in making sound choices about where you invest your resources — namely, balancing the business income you can control with the business income you cannot.